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City Places for City People
Cities Boom as Boomers Fade

by Eric Miller

It wasn't driven by a Baby Boomer, but recently when the window of a Cadillac SUV came down and a voice asked me to move my Honda Fit so she could fit into a parking spot, I had to think this was the remnant of a fading world.

It's been clear for some time that Baby Boomers reaching retirement age are transforming--and will continue to transform--America's cities. Over the past decades many downtowns have been remade into more lively districts with condos for baby boomers. I remember back in graduate school when it was suggested the farthest ring of suburbs will eventually move in instead of out, to downtown, in the "donut."

And so it happened. Unable to move even farther from the city center and no longer needing more space, the movers began to populate the downtown. This is especially attractive since the aging and childless baby boomers now doing the moving don't need the big McMansions built not long ago.

A look at recent census data adds to the other side revealing that since 2000, the number of poor people in the suburbs jumped by 37.4 percent to 13.7 million. That's more than double the increase in cities, of 16.7 percent.

Bring to this discussion a recent read of mine called The Age Curve by Kenneth Gronbach, and we can get our arms around the bigger picture of how changing demographic will impact development patterns, among other things.

Just for clarification, let's review the major players here in terms of generations.

Baby Boomers: There are some 78 million baby boomers born between 1945 and 1964. Baby Boomers control over 80 percent of personal financial assets and more than 50 percent of discretionary spending power. They are responsible for more than half of all consumer spending. The peak age is now over 50, a time when consumption typically falls.

Generation X: There is a total of 69 million members of Generation X born between 1965 and 1984. Compared with previous generations, Generation X represents a more heterogeneous generation, exhibiting great variety. They are diverse in such aspects as race, class, religion, ethnicity, and sexual orientation. The US Census Bureau cites Generation X as statistically holding the highest education levels when looking at age group. Generation X is too small to buy up the houses vacated by boomers.

Generation Y: There are 100 million members of this generation born after 1985. They are spending at a rate five times that of their Boomer parents, but are expected to have high unemployment and thus entrepreneurial spirit.

Of these, the Boomers and Generation Y will have the real impact. It would seem Generation X, being in prime house purchasing age, may be at least contributing to the current woes of real estate. Fewer people mean fewer people to buy homes and more homes without people in them, thus less demand. This doesn't bode well for the suburbs either, at least not ones without amenities like retail and transit.

Gonbach writes in The Age Curve:

Baby Boomers built their dream homes. Many built starter castles of 5,000-plus square feet just in time for their kids to leave home, go off to college, and then get married. The Boomers know that they cannot stay in the houses indefinitely because the upkeep is too expensive to be practical and they simply no longer need the space. In addition, most starter castles are multilevel and Boomers will eventually need one-level floor plans. A lot of these houses are on the market, but there are no buyers because Generation X simply does not have the critical mass to provide the demand. This is a real problem that will not correct demographically for twenty years.
For sure, the farther we go into this, the more Baby Boomers seeking to move downtown will be unable to sell their big homes in the suburbs. For this reason, many will in fact be unable to move downtown. Members of Generation Y, many now in their early 20,s will want to move downtown, but may not be able to afford to.

In a recent publication, Housing America, The Next Decade, from the Brookings Institution, author John McIlwain says as members of Generation Y form households, they will add to demand for housing--reversing the decline caused by Generation X--but not to the extent that the baby boomers did. They are also forming households later in their lives than previous generations, further reducing their impact on housing demand. Plus, Generation Y?s attitudes toward homeownership have been changed by the housing crisis and the recession. They may turn out to be more permanent renters.

McIlwain says:

To get members of generation Y to buy their first home, builders will need to offer starter homes in large numbers at low prices--meaning homes that are small, simple, and on small lots, but that are well designed and built to green energy standards. This is hard to do, except in the outer-edge suburbs. For this reason, many young families will look to live in the older, close-in suburbs where prices have fallen or be forced to move to the outer-edge suburbs where home prices are lowest, regardless of the higher cost in dollars and time of long commutes.
It seems to me everything is accounted for except the outer-ring suburbs and the boomers left there because they are unable to sell. It looks like these areas will have the least demand and thus the lowest prices, which could lead to deterioration, "broken windows" and even a spike in crime. It makes me think of the little old lady who once lived in urban neighborhoods sometimes perceived as quite dangerous some decades ago.

Gas prices and changing preferences will also bring about changes that favor urban areas and walkable suburbs. As Gronbach explains, Boomers are moving away from SUVs and towards smaller, more efficient cars. Generation Y loves all things green and wants to live in walkable areas close to amenities.

Somehow Gronbach however concludes that crime will go up in cities. "Crime will also go up because we'll have a unique combination of unemployed, undereducated young men with a huge appetite for consumption." It's not clear to me exactly how crime will go up in cities because of a large number of unemployed men there and at the same time have a situation where members of Generation Y are unable to afford city life.

The good news is that unemployed members of Generation Y will also start businesses at an accelerating rate. Moreover, much of the outsourcing of manufacturing has occurred during the prime years of Generation X, and a larger population of young people, especially combined with rising fuel and thus shipping prices, could bring manufacturing back to U.S. shores in a huge wave. And remember this huge workforce is becoming available exactly when China is facing the opposite problem.

The book, combined with supplementary material, makes me think in more positive terms about the future we face. The book doesn't deal much with the price of oil or specifically with the move downtown, but the passing of time and the preferences and abilities of generations across that time is likely to mean a more prosperous, greener and sustainable country and no end in sight to the regeneration and revival of American cities.

It was a person of less than average size who climbed down out of that SUV. It may, I thought, make a nice house for someone one day.

Eric Miller